PETROCHINA(601857)：INTERIM EARNINGS LARGELY IN LINE-格隆汇

机构：中银国际
研究员：Lawrence LAU/Rainey DAI

PetroChina’s earnings grew 4% YoY to RMB88.6bn in 1H24, 2% above our forecast. Decent growths at upstream and natural gas marketing segments were largely offset by earnings declines at the other two segments. We expect its earnings to grow 10% HoH in 2H24 as we expect higher earnings from upstream and natural gas marketing. While we trim our 2024-26E earnings by 2%, we reiterate our BUY call on its H shares as they still offer decent dividend yield.
　　Key Factors for Rating
　　The operating profit of its upstream segment grew 7% YoY to RMB91.7bn in 1H24 mainly on 4% YoY increase in realised oil price. That of its natural gas marketing segment also grew 19% YoY to RMB16.8bn on 6% YoY increase in domestic sales volume and 30% YoY decline on loss on imported gas (to RMB4bn). Its chemicals operations also recovered from an operating loss of RMB161m in 1H23 to an operating profit of RMB3.1bn in 1H24 on higher sales volume and improvement in product mix.
　　However, all these were largely offset by the 43% YoY fall in the operating profit of the refining operations on lower refining margin. That of marketing segment also dropped 8% YoY on lower domestic sales volume.
　　Looking ahead, we expect its earnings to gain 10% HoH in 2H24. We expect higher upstream earnings as we currently assume higher oil price in 2H24. Its natural gas marketing also usually sees much higher earnings in 2H of a year on higher demand.
　　The company’s dividend payout ratio was at 45.4% in 1H24, up from 45% in 1H23. We assume its full-year payout ratio to be the normal 45% for future years, down from 50% in 2023, although the company has the capacity to pay more. Even at this level, the company’s H shares still offer decent dividend yield of 6.5-7.0% for 2024-26E.
　　Key Risks for Rating
　　Sharp fall in oil price.
　　Significant impairment against its assets.
　　Valuation
　　We lower our target price for its H shares from HK$8.70 to HK$8.65 mainly to reflect the cuts in our earnings forecasts. Our target valuation is still 5.5% average dividend yield for 2024-26E.
　　We also reduce our target price for its A shares from RMB11.82 to RMB11.15. We still set our target price based on its 3-month average A-H premium, which has narrowed from 46% to 41% since late June.